January 17, 2012

Judge Rules Against Airline Trade Group In Dispute With Bank

A Washington federal judge has ruled against the airline industry's largest trade group in a dispute over whether U.S.-backed loans that allow foreign air transport companies to buy American-made jets harm domestic air carriers.

The Air Transport Association of America sued the U.S. Export-Import Bank in Washington federal district court last year, saying that agency financing for Air India jet purchases undermines the ability of U.S. airlines to remain competitive on international routes. The bank is the federal government's official export credit agency that promotes American goods in the international market.

Michael Kellogg of Washington’s Kellogg, Huber, Hansen, Todd, Evans & Figel, representing the airline association, urged U.S. District Judge James Boasberg to stop the bank’s loans to Air India. Kellogg argued among other things that bank officials failed to assess how the loans will hurt American carriers, from terminated routes to lost jobs. Late Friday, Boasberg ruled for the bank. Click here for the opinion.

Chicago-based Boeing Company, which is selling commercial aircraft to Air India, is not a party in the suit. Still, Boeing supported the U.S. Justice Department in defending the Export-Import Bank’s $4.7 billion loan financing program with Air India.

“This case presents a collision of interests between domestic airlines, which seek to avoid competing against subsidized foreign carriers, and domestic aircraft manufacturers, which desire those foreign carriers to buy U.S. planes rather than shopping overseas,” Boasberg wrote.

The judge denied the air industry association’s request for an injunction because, he said, the group did not prove it will suffer “irreparable harm” during the pendency of the litigation.

Major domestic airlines comprise ATA’s membership. But not every airline chose to participate in the suit, the judge said. United Air Lines, Continental Airlines and American Airlines were among the carriers that opted out. “As a result, none of the airlines participating in this lawsuit currently offers a direct flight between the U.S. and India,” Boasberg wrote.

ATA’s attorneys said the bank’s loan guarantees forced Delta Air Lines in 2008 to sever its New York to Mumbai route. Boasberg said that the plaintiffs needed to prove that any harm in the past was likely to occur again in the future.

Boeing is scheduled this month and in March to deliver airplanes to Air India. But the imminent delivery of the commercial jets did not sway Boasberg. “Any injury to plaintiffs that may be caused by the delivery of one or two planes to Air India is, at this stage, wholly speculative,” the judge said.

Boasberg is scheduled to meet with the lawyers in the case this Friday to discuss the next steps.